nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒02‒10
twelve papers chosen by
J. David Brown
Heriot-Watt University

  1. Ownership and Wages: New Evidence from Linked Employer-Employee Data in Hungary, 1986–2003 By John S. Earle; Almos Telegdy
  2. Political Uncertainty and Crime in Transition Economies By Barbara G. Katz; Joel Owen
  3. Comparing China and India: Is dividend of economic reforms polarized? By Sudip Ranjan Basu
  4. Urban income inequality in China revisited (1988–2002) By Sylvie Demurger; Martin Fournier; Shi Li
  5. Central Bank Interventions, Communication and Interest Rate Policy in Emerging European Economies By Balázs Égert
  6. Union formation and fertility in Bulgaria and Russia: a life table description of recent trends By Dimiter Philipov; Aiva Jasilioniene
  7. The international financial integration of China and India By Lane, Philip R.; Schmukler, Sergio L.
  8. Fiscal Decentralization in China and India: Competitive, Cooperative or Market Preserving Federalism? By Singh, Nirvikar
  9. The Pros and Cons of Banking Socialism By Martin Gregor
  11. Price adjustment under the table: Evidence on efficiency-enhancing corruption By Levy, Daniel
  12. Competitiveness, Economic Freedom and Real Exchange Rate. Evidence from Romania By Herciu, Mihaela; Toma, Ramona

  1. By: John S. Earle (W.E. Upjohn Institute for Employment Research and Central European University); Almos Telegdy (Central European University and Institute of Economics of the Hungarian Academy of Sciences)
    Abstract: How do state, domestic private, and foreign ownership of firms differ in average wages? We address these questions using linked employer-employee panel data containing 1.35 mln workeryear observations for 21,238 firms from 1986 to 2003 in Hungary. Our econometric methods exploit the long panel together with the presence of 3,700 switches of ownership type in the postsocialist Hungarian transition to estimate these wage differentials.
    Keywords: privatization, employment, wages, ownership, Hungary, firms
    JEL: D21 G34 J23 J31 L33 P31
    Date: 2007–01
  2. By: Barbara G. Katz; Joel Owen
    Date: 2007
  3. By: Sudip Ranjan Basu (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: The paper develops a new measure of development, namely, development quality Index (DQI), to compare performance of China and India. The results show that national level development quality grew three times faster in China than in India. Conversely, the health quality grew three times as fast in India than China over the period 1980-2004. The overall regional development quality level improved in both countries, but polarization widened in China. The sign of inter-regional polarization in China indicates a rising concentration of development gains from economic reform policies, while in recent years there are trends of polarization in economic dimension of DQI in India.
    Keywords: Development, Inequality, Polarization, China, India
    JEL: C43 D63 O18
    Date: 2007–01
  4. By: Sylvie Demurger (HIEBS - Hong Kong Institute of Economics and Business Strategy - [The Hong Kong University]); Martin Fournier (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Shi Li (School of Economics and Business - [Beijing Normal University])
    Abstract: Using newly available spatial price deflators, this paper shows that inequality evaluations in the literature<br />overstate the magnitude of inequality and inequality changes in China, as well as the role played by regional differences in the recent inequality rise.
    Keywords: Inequality; China; Spatial price deflators; Inequality decomposition
    Date: 2007–01–30
  5. By: Balázs Égert (Oesterreichische Nationalbank; MODEM, University of Paris X-Nanterre and William Davidson Institute)
    Abstract: This paper analyses the effectiveness of foreign exchange interventions in Croatia, the Czech Republic, Hungary, Romania, Slovakia and Turkey using the event study approach. Interventions are found to be effective only in the short run when they ease appreciation pressures. Central bank communication and interest rate steps considerably enhance their effectiveness. The observed effect of interventions on the exchange rate corresponds to the declared objectives of the central banks of Croatia, the Czech Republic, Hungary and perhaps also Romania, whereas this is only partially true for Slovakia and Turkey. Finally, interventions are mostly sterilized in all countries except Croatia. Interventions are not much more effective in Croatia than in the other countries studied. This suggests that unsterilized interventions do not automatically inuence the exchange rate.
    Keywords: central bank intervention, communication, foreign exchange intervention, verbal intervention
    JEL: F31
    Date: 2006–12–22
  6. By: Dimiter Philipov (Max Planck Institute for Demographic Research, Rostock, Germany); Aiva Jasilioniene (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The paper provides an extensive descriptive analysis and comparison of recent trends in union formation and fertility in Bulgaria and Russia. The analysis is based on data from the Generation and Gender Surveys (GGS) carried out in 2004. We generate a large number of single- and multi-decrement life tables describing various life course events: leaving home and separation from the parental family, entry into union, first and second childbirth, divorce. In addition, we provide information about the status of children within the family and changes in this status. Life tables are constructed for real cohorts as well as for synthetic cohorts. We study four real cohorts, born in 1940-44, 1950-54, 1960-64 and 1970-74. Synthetic-cohort life tables are constructed for three periods of time, referring to the pre-transitional demographic situation (1985-1989), the beginning of the transition (1990-1994) and recent demographic developments (1999-2003). We use the same approach of life table construction as Andersson and Philipov (2002), thus both studies complement each other and open wider opportunities for international comparison. Life tables are frequently supplemented with graphs of smoothed hazard curves. Complete life tables together with some summary indicators are presented in the Appendix. Our findings suggest that societal transformation had a stronger impact on the family-related behavior in the Bulgarian population than in the population of Russia. There is evidence that in some aspects Bulgaria is lagging behind other former socialist and Western European countries where the second demographic transition is more advanced. Evidence also suggests that Russia is lagging behind Bulgaria. However, certain specific features distinctive to Russia, such as the low level of childlessness and a drastic drop in second and subsequent births, lead us to think that Russia may have a model of change particular to the country.
    Keywords: Bulgaria, Russia, family formation, fertility, life tables
    JEL: J1 Z0
    Date: 2007–01
  7. By: Lane, Philip R.; Schmukler, Sergio L.
    Abstract: Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China ' s foreign direct investment liabilities), these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are " short equity, long debt. " Third, China and India have improved their net external positions over the past decade although, based on their income level, neoclassical models would predict them to be net borrowers. Domestic financial developments and policies seem essential in understanding these patterns of integration. These include financial liberalization and exchange rate policies, domestic financial sector policies, and the impact of financial reform on savings and investment rates. Changes in these factors will affect the international financial integration of China and India (through shifts in capital flows and asset and liability holdings) and, consequently, the international financial system.
    Keywords: Investment and Investment Climate,Economic Theory & Research,Banks & Banking Reform,Capital Flows,Financial Economics
    Date: 2007–02–01
  8. By: Singh, Nirvikar
    Abstract: This paper provides a comparative assessment of fiscal decentralization in China and India, including the standard components of expenditure and revenue assignments and institutions for intergovernmental transfers, as well as the nature of subnational authorities over general economic activity. In particular, the case of China, where town and village enterprises have been very active, is contrasted with that of India, where local governments remain circumscribed in their authority, despite decentralizing reforms. The implications of differences in decentralization for fiscal outcomes and economic growth are discussed. The characterization of each country in terms of concepts of federalism, i.e., competitive, cooperative and market preserving federalism, is discussed, in attempting to abstract from the two cases to more general lessons for fiscal decentralization.
    Keywords: cooperative federalism; competitive federalism; market-preserving federalism; decentralization; economic development
    JEL: P35 O10 P26
    Date: 2007–01
  9. By: Martin Gregor (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: When nominal wage rigidity is large, and banking sector oligopolistic, the benevolent government may prefer to regulate interest rates to boost labor demand. A government of a transition economy may postpone bank privatization to keep credit provision under control, as long as inefficiencies of state ownership are not prohibitive. We model a transition economy where the government initially owns enterprises as well as banks. The economy features constant wage, and strong market power of banks. Under these conditions, we identify when the government has incentive to privatize enterprises and/or banks. We derive conditions under which the banking socialism (the government owns banks, but privatizes enterprises) dominates other institutional modes: socialism, industrial socialism, and capitalism.
    Keywords: privatization; banking; transition
    JEL: D72 D78 E62 H20
    Date: 2007–01
  10. By: Sjöholm, Fredrik (European Institute of Japanese Studies)
    Abstract: Equitization (privatization) has been at the core of the policy debate in Vietnam over the last decade but the government’s attitude seems ambivalent. On the one hand, equitization is emphasized in policy statements. On the other, the progress on equitization has been relatively modest and SOEs continue to dominate the Vietnamese economy. This paper examines SOEs and the equitization process in Vietnam. We compare the development with guidelines from economic theory and with lessons from privatization programs in other countries. Equitization in Vietnam is found to target small SOEs and no larger ones, and it does not address the efficiency problem with state ownership since the state typically remains a controlling share of the equitized SOEs. Moreover, economic theory and experience from other countries suggest that the Vietnamese approach with diffused ownership in SOEs and in equitized firms; equitization to employees and management; and little participation of strategic investors, might not be the most efficient approach to public ownership and to equitization. We argue in this paper that Vietnam still has an opportunity to change its approach towards SOEs and equitization and thereby secure increased efficiency and economic growth.
    Keywords: State Owned Enterprises; Privatization; Equitization; Vietnam
    JEL: L32 P21 P31
    Date: 2006–08–01
  11. By: Levy, Daniel
    Abstract: Based on first-hand account, this paper offers evidence on price setting and price adjustment mechanisms that were illegally employed under the Soviet planning and rationing regime. The evidence is anecdotal, and is based on personal experience during the years 1960–1971 in the Republic of Georgia. The description of the social organization of the black markets and other illegal economic activities that I offer depicts the creative and sophisticated ways that were used to confront the shortages created by the inefficient centrally-planned command economic price system with its distorted relative prices. The evidence offers a glimpse of quite explicit micro-level evidence on various types of behavior and corruption that were common in Georgia. Rent-seeking behavior, however, led to emergence of remarkably well-functioning and efficiency enhancing black markets. The evidence, thus, underscores once again the role of incentives in a rent-seeking society.
    Keywords: Corruption; Black Market; Bribe; Price System; Distorted Relative Prices; USSR; Georgia; Command Economy; Price Setting; Price Adjustment; Cost of Price Adjustment; Menu Cost
    JEL: D73 O17 H26 D30 B14 E64 P20 Z13 K42 P26 H40
    Date: 2007–01–16
  12. By: Herciu, Mihaela; Toma, Ramona
    Abstract: In the new context of European Integration, Romania has to improve some important macroeconomic indicators, such as: competitiveness, economic freedom and real exchange rate for a sustainable economic growth. Many authors emphasize that competitiveness and economic freedom affects economic growth through stimulating investment and business environment. The equilibrium exchange rate is crucial as it directly influences external competitiveness, especially through export prices. For Romania, the competitiveness can be improved through the economic freedom growth and the real exchange rate appreciation. But this appreciation must be accompanied by a rise in productivity and in the quality of the products offered on the external markets in order not to affect Romania’s external competitiveness.
    Keywords: competitiveness; economic freedom; real exchange rate; Romania
    JEL: M21 O11 F31
    Date: 2006–12–05

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